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Hammes Company Healthcare, LLC; Hc Tri-City I, LLC v. Larry anderson; Pamela Smith; et al

July 11, 2011

HAMMES COMPANY HEALTHCARE, LLC; HC TRI-CITY I, LLC,
PLAINTIFFS,
v.
LARRY ANDERSON; PAMELA SMITH; ET AL.,
DEFENDANTS.



The opinion of the court was delivered by: Honorable Janis L. Sammartino United States District Judge

ORDER: (1) GRANTING IN PART SUMMARY JUDGMENT; (2) DENYING PLAINTIFFS' EX PARTE MOTION FOR LEAVE TO TRI-CITY HEALTHCARE DISTRICT; FILE SUPPLEMENTAL BRIEF (ECF Nos. 38, 77) AND DENYING IN PART DEFENDANTS' MOTION FOR GRANTS IN PART DENIES IN PART

Presently before the Court is Defendants Tri-City Healthcare District,

Larry Anderson, and Pamela Smith's motion for partial summary judgment. (ECF No. 38.) Also before the Court are numerous responsive pleadings.*fn1 *fn2 (ECF Nos. 50--53, 74--75.) Having considered the parties' arguments and the law, the Court and Defendants' motion.

BACKGROUND

This action arises from the failed development of an outpatient surgery center and medical office building adjacent to the Tri-City Medical Center and Hospital in Oceanside, California (the project). Plaintiff Hammes Company Healthcare, LLC (Hammes) is a healthcare facility design and development company that works with hospitals and medical districts throughout the country. (Opp'n 1, ECF No. 50.) Plaintiff HC Tri-City I, LLC (HC) is a special purpose entity formed for the purpose of leasing the real property upon which the medical office building was to be located and constructing the medical office building. (Beam Decl. ¶ 14, ECF No. 50-2.)

Defendant Tri-City Healthcare District (Tri-City) is a public entity duly organized under California law. Defendants Larry Anderson and Pamela Smith are Tri-City's Chief Executive Officer and Director of Business and Market Development, respectively. (L. Anderson Decl. ¶ 1, ECF No. 38-4; Smith Decl. ¶ 1, ECF No. 38-2.)

In May 2005, Hammes and Tri-City entered into a letter of intent regarding the project's development. (Beam Decl. Ex. 1 (Letter of Intent).) The letter of intent outlined the transaction's proposed terms and directed Hammes to engage in certain pre-construction services related to the project. (Id.) The agreement further provided that Tri-City would reimburse Hammes for its initial development costs and pay a breakage fee if, inter alia, Tri-City decided at its sole discretion not to proceed with the project. (Id. at 6.)

In July 2007, HC entered into a ground lease with Tri-City. (Kibler Decl. Ex. 2 (Ground Lease), ECF Nos. 50-8 to -10.) The ground lease provided that HC would lease for fifty-five years the real property upon which the medical office building was to be located. (Id. at 1; id. § 2.2.) Relevant here, the ground lease contains three contingencies-two that were waivable at HC's option, and one that was a non-waivable condition precedent to construction of the medical office building. (Id. art. 15; see infra Part 2.B.1.)

In July 2008, HC entered into a space lease with Pacific View Surgery Center, LLC (Pacific View). (Kibler Decl. Ex. 3 (Space Lease).) Pacific View, a joint venture between Tri-City and its physicians, was to occupy approximately 38% of the medical office building after its completion. (Bournazian Decl. ISO Opp'n Ex. 29 (Gonzalez Dep.), at 84--85, ECF Nos. 50-11 to -18.) Tri-City also signed the space lease, but did so solely as a guarantor of Pacific View's obligations thereunder. (Space Lease 29.)

For reasons that are in dispute, the project was terminated in early 2009, and Tri-City did not reimburse Hammes or HC for any initial development costs that they incurred. This case and a related one, Tri-City Healthcare District v. HC Tri-City I, LLC, Case No. 09-CV-2334 JLS (CAB), ensued. In this case, Hammes and HC assert six claims against Defendants for: (1) breach of the letter of intent, (2) breach of the ground lease and space lease, (3) breach of the implied covenant of good faith and fair dealing, (4) fraud, (5) tortious interference with the space lease, and (6) promissory estoppel. (See generally Compl., ECF No. 1.)

LEGAL STANDARD

Federal Rule of Civil Procedure 56 permits a court to grant summary judgment where (1) the moving party demonstrates the absence of a genuine issue of material fact and (2) entitlement to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). "Material," for purposes of Rule 56, means that the fact, under governing substantive law, could affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Freeman v. Arpaio, 125 F.3d 732, 735 (9th Cir. 1997). For a dispute to be "genuine," a reasonable jury must be able to return a verdict for the nonmoving party. Anderson, 477 U.S. at 248.

The initial burden of establishing the absence of a genuine issue of material fact falls on the moving party. Celotex, 477 U.S. at 323. The movant can carry his burden in two ways: (1) by presenting evidence that negates an essential element of the nonmoving party's case; or (2) by demonstrating that the nonmoving party "failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof." Id. at 322--23. "Disputes over irrelevant or unnecessary facts will not preclude a grant of summary judgment." T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987).

Once the moving party establishes the absence of genuine issues of material fact, the burden shifts to the nonmoving party to set forth facts showing that a genuine issue of disputed fact remains. Celotex, 477 U.S. at 324. The nonmoving party cannot oppose a properly supported summary judgment motion by "rest[ing] on mere allegations or denials of his pleadings." Anderson, 477 U.S. at 256. When ruling on a summary judgment motion, the court must view all inferences drawn from the underlying facts in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

Rule 56(a) permits a party to move for partial summary judgment. Under Rule 56(g), the court "may enter an order stating any material fact . . . that is not genuinely in dispute and treating the fact as established in the case." "This adjudication . . . serves the purpose of speeding up litigation by eliminating before trial matters wherein there is no genuine issue of fact." Fed. R. Civ. P. 56 advisory committee's note (addressing former Federal Rule of Civil Procedure 56(d)). An order granting partial summary judgment is interlocutory in character; therefore, it is not appealable "prior to the entry of final judgment in the case in the absence of a specific statute authorizing an appeal." Nat'l Union Fire Ins. Co. of Pittsburgh v. Ready Pac Foods, Inc., - F. Supp. 2d -, 2011 WL 1083374, at *3 (C.D. Cal. Mar. 18, 2011).

ANALYSIS*fn3

Defendants make numerous arguments in support of their motion. The Court addresses them as they pertain to each claim for relief.

1. First Claim for Breach of Contract

Tri-City contends that summary judgment of Hammes's*fn4 first claim for breach of the letter of intent is appropriate "because Hammes has not incurred any damages as a proximate cause [sic] of the District's alleged breach of the letter of intent."*fn5 (Mem. ISO MSJ 20, ECF No. 38-1.) Specifically, Tri-City contends that (1) all initial development costs were incurred by HC, rather than Hammes; and (2) Hammes is not entitled to a breakage fee because Tri-City did not terminate the project. (Id. at 20--21.)

Plaintiffs respond that Tri-City committed anticipatory breach of the letter of intent when they bought out the physician--owners of Pacific View and terminated the project. (Opp'n 12--13.) Further, Plaintiffs contend that Hammes incurred "extensive fees and costs" separate and addition to any initial development costs incurred by HC. (Id. at 13--14.) Accordingly, Plaintiffs contend that Hammes is entitled to reimbursement of its initial development costs and a breakage fee. (Id. at 13.)

"A claim for breach of contract under California law consists of the following elements: (1) the existence of a contract; (2) performance by the plaintiff; (3) breach by the defendant; and (4) damage resulting from the breach." Alcalde v. NAC Real Estate Invs. and Assignments, Inc., 316 F. App'x 661, 662 (9th Cir. 2009) (citing First Commercial Mortg. Co. v. Reece, 108 Cal. Rptr. 2d 23, 33 (Cal. Ct. App. 2001)).

The letter of intent requires Tri-City to reimburse Hammes for its out-of-pocket initial development costs and pay a breakage fee if Tri-City "decides at its sole discretion not to proceed with the Project." (Letter of Intent 6.) Defendants contend that Tri-City "never terminated the letter of intent." (Opp'n 20.) According to Defendants, Plaintiffs provided unequivocal notice of their intent to terminate the project on June 30, 2009. (Smith Decl. ¶ 8; id. Ex. 6.)*fn6

Plaintiffs, however, contend that Tri-City terminated the letter of intent on April 3, 2009, when Defendant Smith told Plaintiffs' representative, Kevin Kraiss, that the project would not proceed.*fn7 (Kraiss Decl. ¶ 9, ECF No. 50-7.) In fact, as early as March 17, 2009, Tri-City identified termination of the management agreement with Hammes as a "potential next step" regarding the project. (Bournazian Decl. ISO Suppl. Mem. Ex. A, at 8, ECF Nos. 74-2 to -4.) Thereafter, on April 30, 2009,

Tri-City's board of directors approved termination of the project and payment of a portion of Hammes's initial development costs. (Bournazian Decl. ISO Opp'n Ex. 18.) On May 28, 2009, Hammes sent a letter confirming its understanding that Tri-City did not intend to proceed with the project.*fn8 (Kibler Decl. Ex. 19.)

Viewing this evidence in the light most favorable to Plaintiffs, the Court concludes that a genuine issue of material fact exists as to whether Tri-City unilaterally determined not to proceed with the project, thus obligating it to reimburse Hammes for its initial development costs and pay a breakage fee. According to Kevin Kraiss, Defendant Smith expressed Tri-City's intent to terminate long before Plaintiffs ever declared the ground lease void.*fn9 Although Defendant Smith denies that she ever made such a representation (Smith Decl. ¶ 11), Plaintiffs' assertion is substantiated by Tri-City's own documents. Among other facts in Plaintiffs' favor, Tri-City's board had no reason to approve termination of the project and payment of Hammes' initial development costs in April 2009-a month before Tri-City received Plaintiff's letter-unless it had already determined not to proceed.

Because a genuine issue of material fact exists as to whether Tri-City unilaterally terminated the project, a genuine issue of material fact also exists as to whether Hammes incurred any damages. Specifically, if Tri-City decided at its sole discretion not to proceed with the project, then the letter of intent obligated it to pay Hammes a breakage fee. Failing payment, Tri-City breached the letter of intent, and Hammes suffered damages at least in the amount of the breakage fee.*fn10 Accordingly, Defendants' motion for summary judgment of Hammes's first claim is DENIED.

2. Second Claim for Breach of Leases

Tri-City*fn11 contends that summary judgment of Plaintiffs' second claim for breaches of the ground lease and space lease is appropriate for three reasons. First, Tri-City contends that Hammes lacks standing to assert claims for breach of the ground lease and space lease because it was not a signatory to either contract. (Mem. ISO MSJ 9--10.) Second, Tri-City contends that Plaintiffs failed to satisfy certain conditions precedent to the ground lease and space lease and, accordingly, cannot state a claim for breach of either contract. (Id. at 11--13.) Third, Tri-City contends that there is no ...


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